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Tax Issues On Funding Campaigns

by Michael Lodge

Many new start-ups and individuals trying to raise money for profitable businesses do funding campaigns on various funding sites such as Indiegogo, Kiskstarter and others. The question that comes to us by these new businesses and people is how is this treated tax wise?

Do the funds raised from my campaign count as income? The answer is yes. The funds raised from your campaign must be considered income. These funds are generally meant to cover your costs of start-up on the project you are working on so you will have costs to offset the income. The best thing to do when you do your financial statement keep track of your funding income and expenses within your financials but put them to the side within the financials so you can tell how well you did on the campaign.

1099’s – in 2011 the Internal Revenue Service (IRS) enacted a regulation that requires the reporting of amounts received from payment card transactions as income on form 1099-K. All banks, merchant processing, PayPal and your funding site will issue you a 1099-K (minus PayPal, if used because they issue their own). If you

Just remember if you received a 1099-K that has to be reported as income on your tax return. The 1099-K is sent into the IRS and they have that information on your systems that match your Federal Identification Number. Even if you do not receive a 1099-K you still need to report the income you received. Record it always in your financial statements.

If you are a non-profit organization the funds are reported as funds raised for your charity.